Income of Rs.7.75 lakh – Zero Tax After Budget 2019-20

The biggest buzz about Budget 2019 is that a citizen can get full tax rebate if his or her income during a financial year is INR 5,00,000 or less. The rebate can be claimed under Section 87A.

However, do you know that you can actually pay zero tax even if your income is INR 7.75 lakh? If you are a salaried individual whose income is INR 7.75 lakh or less, then you can channelize your income into various saving segments that allow 100% deduction while computing your taxable income. The overall impact of channelizing income into saving segments will result in tax saving of INR 15,000 (approx.) Let’s explore the areas one by one.

Increase in Standard Deduction

With current budget has increased the standard deduction by INR 10,000. This means for FY 2019-20, the available amount of standard deduction will be INR 50,000. Previously, this was INR 40,000.

Deduction u/s 80C

Another area that can be explored is the Section 80C. Section 80C usually offers deductions for investment in PPF, EPF, etc. Along with these investments, deductions for payment for tuition fees is also available. A cumulative of INR 1.5 lakh is available.

Deduction u/s 80CCD(1B) and 80D

After availing deductions under Section 80C, a tax payer will also be able to claim deduction under section 80CCD. This section offers deduction upto INR 50,000 for investing in National Pension Scheme (NPS).

Section 80D allows deduction upto INR 25,000 for payment of premium for medical insurance. The insurance premium can be in respect of self, spouse or even family. The amount of deduction increases automatically if insurance premium is being paid of parent who is a senior citizen.

Deduction for Interest Income u/s 80TTA

One more area that can be explored is Section 80TTA. Under this section, if a person has an income that has been generated as interest, then the same can be claimed as a deduction upto INR 10,000.

Final Overview

Particular

Amount (INR)

Gross Salary

7,75,000

Standard Deduction

(50,000)

Net Salary

7,25,000

Income from Other Sources (Interest)

10,000

Gross Taxable Income

7,35,000

Deduction u/s 80C

(1,50,000)

Deduction u/s 80CCD (1B)

(50,000)

Deduction u/s 80D

(25,000)

Deduction u/s 80TTA

(10,000)

Income under salary head

5,00,000

Income Tax

12,500

Rebate under Section 87A

(12,500)

Thus, we find that the new Budget has allowed people to enjoy a state of zero tax payment even if their income is INR 7,75,000 annually.

Nonetheless, as per statements during the budget it was declared that there will rebate for income upto INR 5,00,000. From INR 5,00,001 to INR 10,00,000 the applicable tax rate would be 20% and from INR 10,00,001 and above the rate of taxation would be 30%.

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